SFL Corporation Ltd

NYSE:SFL

Earnings Call Transcript 2018-Q2

[Operator]

Good day, and welcome to the Quarter 2, 2018 Ship Finance International Limited’s Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ole Hjertaker. Please go ahead, sir.

[Ole Hjertaker, Chief Executive Officer]

Thank you. And welcome everyone to Ship Finance International’s second quarter conference call. With me here today, I have our CFO, Harald Gurvin and Senior Vice President, André Reppen.

Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, estimates or similar expressions are intended to identify these forward-looking statements.

These statements are based on our current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include conditions in the shipping offshore and credit markets. For further information, please refer to Ship Finance's reports and filings with the Securities and Exchange Commission.

The Board has declared a quarterly dividend of $0.35 per share. This dividend represents $1.40 per share on an annualized basis or 9.5% dividend yield based on closing price of $14.75 yesterday. This is our 58th consecutive dividend and we have now paid 24.50 per share in dividends or more than $2 billion in aggregate since 2004.

The reported net income for the quarter was approximately $60 million or $0.15 per share. This is after an impairment charge of $22 million relating to the sale of the three VLCCs after quarter end. Aggregate charter revenues recorded in the quarter, including 100% owned subsidiaries, accounted for as investment in associate was approximately $141 million and the EBITDA equivalent cash flow in the quarter was approximately $108 million. Last 12 months, the EBITDA equivalent has been approximately $440 million. In the second quarter, we successfully issued a new $164 million convertible note. This note has a maturity in 2023, and has a cash coupon on 4.875% per year. The initial conversion price was $18.93 per share or 33% above share price at the time and the strike will be adjusted for dividends paid going forward.

Some of the amounts raised have already been put to work in connection with the recent acquisitions, and we have grown our backlog by more than $800 million last five months as seen -- and we have also seen a major change in the fleet mix. 44% of our backlog is in the liner segment, up from around 25% six months ago. And the tanker segment has been reduced from nearly 20% to around 10%. On a relative base, the offshore sector has also come down from more than 40% six months ago to around 33% currently.

Earlier today, we were pleased to announce the acquisition of three modern eco-design container ships build 2015, and with a capacity of 10,600 TEU. The first vessel is scheduled to be delivered to us already next week and the last vessel in early October, so we expect full cash flow in the fourth quarter. The vessels are chartered long term to a world leading container line with a minimum period until late 2024 and options to extend until 2029. The results to a purchase option with a profit split at the end of the initial period.

Our backlog will increase by approximately $260 million, increasing to approximately $430 million if the charter extension options are exercised. The purchase price and terms are confidential. But in order to facilitate the quick closing and benefit from the cash flow generated, we will fund the transaction with a combination of cash at hand and $200 million intermediary bank financing. The EBITDA contribution from these assets is estimated to approximately $35.5 million per year.

In late May, we took delivery of four 14,000 TEU container vessels in combination with long term time charters to Evergreen. The charter period is until mid-2024 with options for the charter to extend the period by 18 additional months. The transaction added nearly $450 million to our charter backlog and the estimated annual EBITDA contribution from these vessels is approximately $60 million with full cash flow effect in the current quarter.

At the beginning of April, we took delivery of a fleet of 16 feeder size container vessels ranging from 1100 TEU to 4400 TEU in combination with long term bareboat charters to a leading container line. The purchase price is confidential, but close to recycling value of the vessels; and the charter term is until 2025; and the charter has purchase options during the term of the charters; and the purchase obligation at the end of the period, effectively eliminated residual risk. Aggregate EBITDA contribution is approximately $20 million per year from these vessels.

And with our large and diverse fleet, we continue our fleet renewal processes and have sold another three older VLCCs subsequent to quarter end. During the second quarter, we also sold the SFL Avon, which was the only 1700 TEU feeder vessel in our fleet that traded in the short term charter market. And in addition, we have agreed to sell the 2007 build jack up Soehanah for approximately $84 million with delivery later in the year. This rig is on a charter paying $10,000 per day currently, and we believe we can invest the capital more effectively in other assets when the sale is finally concluded. Delivery will be later this year and we expect the book gain relating to the sale as the book value at quarter end in June was approximately $76 million.

In terms of numbers of vessels, we now have more vessels operating in the liner market than in other any other segment. And as mentioned earlier, this segment represents 44% of our charter backlog. Our focus has primarily been on new design container vessels between 9,000 and 19,000 TEU and we continue to see opportunities in this segment as illustrated by the recent acquisitions. After the sale of the 2010 build 1,700 TEU vessels SFL Avon in the second quarter, all container vessels are now employed on long term charters. We also have two car carriers, the Glovis Conductor and the Glovis Composer, which were on long-term charters until the third quarter of 2017 and thereafter, re-chartered in the short to medium-term charter market. We could look at longer period for these vessels, but believe the timing is not optimal for that period.

The spot crude oil market has remained soft for several quarters as a result of high fleet growth, cuts in OPEC volume and significant oil inventory draws. Currently, there seem to be a more balanced market with forward rates in the last quarter -- in the fourth quarter significantly above current levels. The charterer of the 5 vessel, Frontline Shipping Limited or FSL, is a non-recourse subsidiary of Frontline Limited and so far FSL has been able to pay the base rate but drawing on a previously built up cash profit. In the second quarter, the vessels earned approximately $8,100 per day on average, which is well below the base charter rate of $20,000 per day.

We did receive the full charter rate of $20,000 per day during the second quarter. But according to Frontline, the buffer was down to below $4 million at quarter end and therefore, not sufficient to continue supporting the full charter hire, going forward. Until the spot market recovers above base rate, the revenues from these vessels will therefore be linked to the actual earnings generated in the spot market. And if the full base rate is not paid, the difference will accumulate as a claim and be payable when the market recovers above the base rate again. The remaining five vessels are built between 2001 and 2004, and the Company's average cash breakeven rate is approximately $11,500 per day after financing costs.

These assets are the only vessels remaining from the Company's inception 14 years ago after sending more than 40 older vessels profitably over the years with accumulated net book gains of around $100 million, including the $22 million impairment recorded in the second quarter.

We have over the years focused on significant repayment of debt associated with these vessels and the remaining vessels are financed with $85 million in debt, which is in line with current recycling values. The vessels continue trading as crude oil tankers, but we are exploring alternative uses for these vessels, such as commercial projects, long-term storage or other alternative employment options with a focus on improving long-term value. The sale of the three vessels to ADS in July should be seen in this context where a portion of the sales proceeds from the vessels has been reinvested in this new venture.

We invested $10 million giving us 17% share in the Company. And for us this is an opportunistic financial investment close to what we believe is a low point in the business cycle for tanker vessels with limited downside to carrying recycling values. Our investment as a shareholder in ADS could therefore give us significant upside potential with very low risk exposure at the tail-end of these vessels’ commercial line. The net proceeds from the sale of these vessels included $10.1 million in the form of interest bearing low nodes from Frontline Limited as competition for the termination of their management commitments.

In addition to the VLCCs, we also have exposure to the crude oil tanker market through two modern Suezmax tankers, which are traded in a pool with sister vessels owned by frontline. For these vessels, the average charter rate in the second quarter was approximately $12,200 per day, down from $15,100 per day in the previous quarter. In addition to that, we also have two 112,000 deadweight ton LR2 two product tankers on charter to Phillips 66, and two 2008 built chemical carriers chartered to Sinochem from Duke. In April, we agreed to extend the charters for the Sinochem vessels for another three years, and these vessels contribute approximately $3 million of EBITDA per year in this expansion period.

We have 22 drydock vessels in the fleet with 16 larger vessels chartered out on long-term basis, and seven handysize vessels traded in the spot market. One of our long-term objectives is to combine stability and predictability in cash flow with optionality as you have seen overtime that market volatility can generate super returns from time-to-time. The Charters to Golden Ocean is an example of this. We have 33% profits bid on top of the base rate of $17,600 per day plus interest adjustment or $18,600 per day. We did not generate any profit split in the second quarter but based on broker reports, the Capesize market is currently above the profit share threshold level.

The profit split will be based on actual performance by these specific vessels so we cannot give any guidance on when a profit share will materialize. But as the profit share is calculated and payable on a quarterly basis, we believe there is good probability for profit shares over the remaining eight-year charter period. The kamsarmaxes and supermaxes are all on long term fixed rate time charters, while the seven handysize vessel drybulk carriers continue to trade in the spot market. The rates achieved this quarter for the handyzie vessels were approximately $8,700 per trading day, which is down from approximately $9,500 in the previous quarter.

We were very happy to see the Seadrill financial restructuring finally implemented in July. As part of the restructuring, we have agreed to reduce the contractual charter hire for the three weeks by approximately 29% for a period of five years, beginning January 2018 with the reduced amounts added back in the period thereafter. The term of the leases for West Hercules and West Taurus will also be extended by 13 months until December 2024. We have concurrently agreed with our financing banks that the loan terms will be extended by four years starting from the original maturity date of each of the three separate loan facilities with reduced amortization during the extension period compared to the current level. Assuming -- and in the cash flow from these three rigs during the extension period after the adjustment in the loan amortization is estimated to be approximately $29 million per year.

Seadrill has sub-chartered the harsh environment jackup rig West Linus to ConocoPhillips until the end of 2028. And the harsh environment semi-submersible rig West Hercules has recently been awarded consecutive sub charters in the North Sea and is now working for Siccar Point Energy and will thereafter commence drilling for Norwegian oil major Equinox, which was previously known as Statoil. The semi-submersible rig, West Taurus, remains in layup in Spain. Including the West Linus, we have reduced the debt from $1.9 billion initially on the Seadrill rigs to less than $725 million currently. And of this aggregate outstanding loan balance, only $266 million is currently guaranteed by Ship Finance.

Ship Finance also has four offshore support vessels on long term charters to a known recourse subsidiary of Solstad Farstad ASA. The market for offshore support vessels remains challenging and the vessels are currently not employed on sub-charters. In light of the depressed market, the company and -- we and other financial creditors to this entity have entered into a restructuring agreement in July where we will receive 50% of the agreed charter hire for two vessels, Sea Cheetah and Sea Jaguar, until the end of 2019. All other payments under the respective charters will be deferred until the end of 2019. The offshore support vessels only represent approximately 2% of our charter backlog as of June 30th and our financial commitments and limited to a corporate guarantee of $30 million under the related bank financing of the five vessels.

If we then switch to cash flow last 12 months, the normalized contribution from projects, including vessels accounted for as investment in associates, we had an EBITDA contribution defined as charter hire plus profit share in short term charters less operating expenses in general administrative expenses of $439 million in the 12 month period. Net interest was $122 million or approximately $1.20 per share and our normalized ordinary debt installments relating to the Company's project was $176 million or approximately $1.74 per share in the 12 month period.

We would like to stress that this is including the continuing high amortization of the Seadrill rig loans last two quarters despite the reduced charter rate. This was done intentionally from our side to avoid extra fees and will be adjusted down by nearly $50 million over the period from the fourth quarter this year until second quarter next year in connection with schedules rollover of the loans. Net contribution after this very high amortization was $141 million or $1.48 per share over the last 12 months, which is in line with the dividends declared. From our inception more than 14 years ago, we have paid out approximately 80% of net income in dividends, which illustrates the moderate dividend policy, and it has allowed us to significantly grow our business organically.

And with that, I would like to give the word over to our CFO, Harald Gurvin, who will take us through the numbers for the quarter.

[Harald Gurvin, Chief Financial Office]

Thank you, Ole. On this Slide, we have shown a pro forma illustration of cash flows for the second quarter compared to the first quarter. Please note that this is only a guideline to assess the Company's performance and is not in accordance with U.S. GAAP. Total charter hire for the second quarter was $138 million, up from $129 million in the previous quarter. The main reason for the increase is the delivery of 19 container vessels during the second quarter. The 15 feedser size container vessels were delivered beginning of April and close to two quarter cash flow. While the four large container vessels on charter to Evergreen were delivered in May and will have the full cash flow effect in the third quarter. We also expect to take deliveries of two of three containers vessels announced today in the third quarter and last one in early October. We should then have close to full earnings effect in the fourth quarter.

Revenues from tankers were slightly down in the quarter due to the sale of one VLCC in the first quarter and lower earnings on the two Suezmax tankers trading in the pool. We received full charter hire on eight VLCCs on charter for Frontline Shipping in the second quarter, contributing approximately $1 million of the EBITDA per vessel. But until the market recovers above the base charter rates, the contribution from the vessels going forward will be based on the actual performance. Three of the vessels have been sold post quarter end, leaving only five vessels.

Dry bulk revenues were in line with the previous quarter, but offshore revenues were down due to the agreements on the five offshore support vessels on charter to Seadrill vessel. In light of the challenging market, we received no charter hire in the second quarter while the amendments were being finalized. Under amended agreements, we will receive 60% charter higher on two of the vessels until the end of 2019 and all other payments under respective charters will be deferred until end of 2019. The EBITDA contribution from these vessels has been approximately 2 million per quarter in total, which will then reduce to approximately $550,000 until end 2019. So overall this summarizes to an adjusted EBITDA of $107.7 million for the quarter or $1 per share, up from $99.5 million in the previous quarter.

We’ll then move on to the profit and loss statement as reported on the U.S GAAP. As we have described in previous earnings calls, our accounting statements are slightly different than those of a traditional shipping company. As our business strategy focuses on long-term charter contract, a large part of our activities are classified as capital leasing. As a result, a significant portion of our charter revenues are excluded from U.S. GAAP operating revenues and instead looked as revenues classified as repayment of investment and finance fee, vessels in associates and long-term investments and interest income from associates. If you wish to gain more understanding of our accounts, a separate webcast which explains the finance for these accounting and investment in associates in more detail can be viewed on our Web site shipfinance.bm under investor relations and webcast.

Overall for the quarter, we reported total operating revenues according to U.S. GAAP of $96.8 million. We recorded an imperilment charge of $21.8 million relating to the sale of the three VLCCs, which was agreed subsequent to quarter end. Total operating expenses were $79.4 million, including the $21.8 million impairment charge, resulting in an operating income of $17.2 million. From the first quarter 2018, U.S. GAAP also requires us to include the mark to market of equity securities in our income statement, which was positive with approximately $16 million in the quarter. This mainly relates to our 11 million shares in Frontline. So overall and according to U.S. GAAP, the Company reported net income of $15.8 billion or $0.15 per share.

Moving onto the balance sheet, we showed $145 million of consolidated cash at the end of the quarter, which excludes $16 million of freely available cash in our three subsidiaries accounted for as investment in associates. Other current assets of $141.5 million includes the jack up drilling rig Soehanah at $76 million, which following the agreement to sell the rig has been reclassified as a held for sale asset. Short-term and current portion of long-term interest-bearing debt includes the $320 million intermediary financing for the four large container vessels on charter to Evergreen, where we are in the process of arranging a long-term financing. Stockholders’ equity was approximately $1.2 billion, giving a book to equity ratio of approximately 26% at the end of the quarter.

Then looking at our liquidity and financing spaces. As mentioned, we had total available liquidity of $161 million at the end of the quarter, including cash in our subsidiaries accounted for as investment in associates. In addition, we had available for sale securities of $114 million, which includes investments in the senior secured bonds and other securities with a fair value of $51 million at quarter end and also our 11 million shares in Frontline with a market value of approximately $57 million based on the closing share price yesterday. We had a total of six debt free assets at quarter end, including the two car carriers, three 1700 TEU container vessels and the jack up drilling rig Soehanah, which has been agreed and sold. The combined charter value of these assets is approximately $166 million based on average broker appraisals, and we may potentially enter into financing on some of these assets in the future.

On the financing side, we issued $164 million in senior unsecured convertible notes in April. The five year notes bear interest of 4.875% per annum and are convertible into the Company's common shares at an initial conversion price of approximately $18.93 per share. We also entered into $50 million financing with a bank for the 15 feeder size container vessels we acquired in April. With this tender, we’re matching the seven year term of the charters and with an annuity style repayment profile.

In connection with the four 14,000 TEU container vessels acquired in May, we entered into $320 million unsecured loan facility provided by an affiliate of Hemen Holding Limited, our largest shareholder. The loan facility is non-amortizing and with the term of more than one year. But we are in the process of arranging a long term financing for these vessels at attractive terms. For the three 10,600 TEU container vessels announced today, we have received a firm commitment for a $200 million intermediary bank facility to part finance acquisition. The facility has a maturity of more than one year and we expect to arrange the long term financing in the near term. Given the very strong credit profile of the charterer, we believe this can be done on very attractive terms.

Then to summarize, the Board has declared a cash dividend of $0.35 per share for the quarter. This represents a dividend yield of 9.5% based on the closing share price yesterday. Net income for the quarter was $16 million or $0.15 per share. We have strengthened the balance sheet with the issuance of $164 million convertible notes in April. We have over the last five months acquired a total 22 vessels, adding more than $800 million to the charter backlog. At the same time, we’re seeing a significant shift in the fleet mix with increasingly diversified high-quality counterparties.

And with that, I give the word back to the operator who will open the line for any questions.

[Operator]

Thank you [Operator Instructions]. Now we will take our first question from Randy Giddens from Jefferies. Please go ahead your line is open.

[Randy Giddens, Jefferies]

So quick question on just for modeling, looking at the asset sales. We do expect to deliver the three older VLCCs, namely what months? And same thing, what month do you expect to deliver the Soehanah later this month -- later this year?

[Ole Hjertaker, Chief Executive Officer]

So the three VLCCs, two of them have been delivered already to the new buyer and so one was delivered mid-July, one was delivered a week ago and one is expected to be delivered in a week’s time. And for the Soehanah, there is more flexibility for the buyer on the exact date. So there’s a couple off date in mid-December but in the mean time, we will receive the $10,000 per day bareboat higher.

[Randy Giddens, Jefferies]

And then you mentioned that the EBITDA contribution for the three 10,600 TEU containerships will be a little over $35 million. Was the purchase price closer to 8 times or 10 times this multiple?

[Ole Hjertaker, Chief Executive Officer]

I cannot give you specific guidance on that, I’m afraid.

[Randy Giddens, Jefferies]

I look at what the LTV of the $200 million loan, but I guess that won’t help either. So you mentioned your current contract backlog is about 44% containerships, 10% tankers. Do you expect this wide different to remain intact next year or do you expect to get more active in the tankers space now that you only have a handful of older VLCCs remaining?

[Ole Hjertaker, Chief Executive Officer]

Well, we have been looking at the larger opportunities, I would say, across the board. Of course we cannot be specific on anything other than the deals we actually end up doing, but we have looked at also opportunities in the other sectors. We have of course our objective is to have a balanced portfolio. But again, of course the bottom-line is to do the right deals. So based on the deals we have done recently that those are the deals where we have felt that we have the right combination of assets, structure counterparty and also received exposure and financing where that cocktail, if you call it, that works for us. But we would of course also be happy to do deals in the other segments. But I would say generally it’s because -- and as we see new deal opportunities almost on a daily basis. So that is all about cherry picking the deals and do the right deals and hopefully build the portfolio on that basis.

[Randy Giddens, Jefferies]

One last question from me, so SFL roughly -- your coverage ratio 1.2 to 1.3 times, it will be for the rest of this year 2019. Can you comment on maybe the dividend sustainability or possible growth over the next two years now to new containerships?

[Ole Hjertaker, Chief Executive Officer]

So I think if you take a step back here, we have been very quiet on the execution front for a period and that was linked to the feeder restructuring where we wanted to be seen as a very strong -- and also financially we were reporting cash to ensure that we have had a lot of flexibility in that process. Now that is behind us and we are now putting more capital to work. So I would say some of the deals we have done would also be something almost like a catch up a little bit in terms of ordinary deal flow that you need to do on an ongoing basis given the portfolio we have.

Of course, the objective when we do new deals is that it is accretive for our shareholders, but we cannot give you specific on timing for that. And also the board reserve, always reserve the right to never give protections on dividends but history tells us that there have been very rarely a downward adjustment and normally is stable or increasing. So hopefully we can continue that and build the dividend also going forward, but we cannot be specific on timing or amounts.

[Operator]

And your next question comes from Greg Lewis from BTIG. Please go ahead your line is open.

[Greg Lewis, BTIG]

I guess just following up on Randy's question. Clearly, there's a lot of deals and transactions to be done here as we look out over the next three, six, 12 months. You’ve been very active in the liner business here, your three deals more recently. At what point is too much liner -- or container ship or liner exposure? Are we comfortable having 50% of the portfolio being in these types of assets just given their long-term coverage and counterparty risk?

[Ole Hjertaker, Chief Executive Officer]

I think as we look forward, on our side, we’re not so focused on percentage mix it’s all down to the individual deals. And the way we do the deals just as we built them, we put them in separate vehicles underneath Ship Finance parent and then we try to structure it with financing where we also limit guarantee obligations going up. So we have -- in the past for instance, we had a very high percentage of offshore exposure at one time, simply because at the time those were the right deals to do and they were chunky deals and therefore they were weighing much in the portfolio.

So going forward I don’t think we can give any guidance that we would grow evenly across the board in the various segments, but of course we want to have a diversified portfolio. And therefore, hopefully, as we also continue growing the container side, we will also grow the other sectors is probably the best way to phrase it. We have ambitions to build the portfolio overall and source new deals that will be accretive.

[Greg Lewis, BTIG]

So just in thinking about where we are in the cycle for the container shipping industry, there's a lot more activity -- there’s a lot more potential deals you’re looking at. So that in of itself just we’re not looking at real numbers, so we could actually see some deals. One other question I had is you still have the two bridge financings when -- realistically when could we see those bridge financings become permanent bank financing?

[Harald Gurvin, Chief Financial Office]

I mean, if you look at the deals of course both we’ve executed very quickly. If you look at the four Evergreen vessels there we are well advanced in arranging a financing. So hopefully that will close within the third quarter that is the plan by end September.

[Greg Lewis, BTIG]

And then does the bridge financings limit your ability to go after transactions, i.e. do we need to get that financing in place before we can go after our next deal?

[Harald Gurvin, Chief Financial Office]

Not really. I mean both -- if you look at these financings, we entered into the $320 million that are at term of more than one year. So you have time to finance it below we probably go through the financing their within the third quarter. The offer we received for the $200 million bridge facility that also has a term of more than one year but there we’ve also started discussions for long-term financing and I think that should be a very easy project to finance based on the counter part.

[Ole Hjertaker, Chief Executive Officer]

And just adding to that, I mean the whole objective for us of using the bridge structure versus going straight for the long-term financing is exactly that we then will be able to execute more deals and also get the benefit of getting the cash flow earlier instead of waiting to put all pieces together. So I think this is the strength we have because of our relative size and financial flexibility.

And on the last deal the banking question turned around and came up with this committed on very, very short basis, which is I would say almost unheard of in the banking market. Which of course is we’re very pleased to see that and I think is also hopefully demonstrates our standing within the banking community and our ability to source capital. In the end -- and the take out financing the reason why we didn’t do that in the first place is that our objective is to source financings that is very attractive on a long-term basis and what we are contemplating there takes a little longer to put together, and that's why we do it in this two-step approach.

[Operator]

And our next caller is Fotis Giannakoulis from Morgan Stanley. Please go ahead.

[Fotis Giannakoulis, Morgan Stanley]

I want to follow up again on the latest acquisition of the three containerships. If you can give us a little bit of color of how shall we think of the free cash flow after debt repayments and how shall we think of refinancing risk and the residual risk after the expiration of the charters?

[Ole Hjertaker, Chief Executive Officer]

I can we give you guidance there. First of all, I would say these three container deals -- of course, it all depends on exact structure of the financing structure. But we do expect, I would say, from low mid teens on the terms of -- on the equity return to maybe high teens depending a little bit on final structure. So compared to the equity that was inject that is there as we see it quite attractive and very accretive. If you then look at the residual value, which of course always is unknown because it is forward in time and you don't know exactly what it is. We have always tried to take a very conservative approach to residual value assumption. So typically, we take a look at what we believe are mid-cycle replacement costs. We depreciate that down, I would say, from 20 to 25 years typically in our calculations to a conservative recycling value, and then we try to have a buffer also of that. And the reason for that is that as we all know, I mean over time you can build an infinite number of vessels. Every new vessel is on the margin more efficient than the previous vessel.

And therefore, at the end of the charter period, we have to make sure that we have a structure where we have a reasonably comfortable breakeven level from that point. That also means that we -- usually we always build in significant debt repayments to ensure that the breakeven also on the financing is sufficiently low for the period thereafter. So this all goes together in what we call cocktail of creating hopefully an accretive deal, and we’ve now been in business for 14 years and what we say -- so far so good. We have been able to keep a quite high dividend payout over these years and been able to reinvest and also not be too exposed in down cycles in individual cycles.

[Fotis Giannakoulis, Morgan Stanley]

And can you also give us some information about the repayment profile of the loans that you signed about $50 million for the feeders. Is this down to zero during the life of the contracts? And also on the containership repayment profile -- and are there any maturities? I noticed some handysize vessels. Do you expect that these maturities will be refinanced in full or you will have to pay down the debt?

[Harald Gurvin, Chief Financial Office]

If you look at the $50 million facility for the 15 vessels that annuity style repayment structure down to zero over the seven years to look in the cash flow over the charters. If you look at the container financing we’re looking at, I cannot comment on the repayment structure there yet that we can get back to once finalized, but the two bridge facilities we have entered into they are non-amortizing at least in the near term. So they will most likely be non-amortizing until we enter into the long term finance. If you look at near term maturities, there aren’t -- there’s nothing on the handysize vessels.

We have some other facilities coming up for refinancing. We have -- I think you’re talking about the Supermax vessels, there we have -- one coming up in December 2018, $22 million that’s for two vessels. We are in discussions on the refinancing on that I cannot comment anything on the amount or anything. And then we also have a three vessel facility for supermaxes coming up in February ’19 where we will of course manage that in due course. But all these facilities and of course they have deep repayment structures, so it should be manageable. We also have the facility for the Frontline vessels coming up end of the year where as Ole mentioned the current outstanding of the three vessels first quarter end is around $85 million, which is basically in line with the recycling values of those vessels.

[Fotis Giannakoulis, Morgan Stanley]

One last question about the financing landscape, but I remember about a year ago there were a lot of Asian leasing houses, Chinese, Japanese companies. They were very keen in acquiring these containerships like the ones that you recently built. How does the competitive landscape look like right how, have this availability of capital or these competitors been less active that it gives more opportunities for additional transactions? If you can comment who else or how many other parties try to bid on this latest containership acquisitions or if it was a private deal that you negotiated yourself.

[Ole Hjertaker, Chief Executive Officer]

Yes, to first commenting on the various providers of financing of capital. Yes, there has always been a number of companies providing capital to the maritime interstates, everything from. That could be German KGs, and if you go back 10 years, you have the U.S private equity money active for periods. You have seen the Chinese leasing companies building up substantially and of course also the Japanese, we have always been there but then basically or mainly related to Japanese built vessels. What we have seen over the years is that -- and from our side, we try to work with these various capital providers, because what we see is that they also look at the risk structures. And they see that working with us because of our size and position in the market can also be a benefit.

So for instance we have a few vessels that have been financed in China with some of the providers of capital that you would see in the news. With regard to this specific transaction, this has been direct private deal with obviously one of our existing customers and therefore has not been flushed around in the market by brokers, whether or not they also have communicated with others on the vessels. Of course we don’t have any insight into that. But it’s important here to also understand that this is not a bareboat deal, this is not a financing structure. These are assets where we will operate the vessels. And of course there our position as a quality operator is important. We would never have been in a position to do this on the vessels we are running and operating -- are doing so at the highest standard with the top performance for our customers. So I think it’s -- maybe it’s a testament to our structure where we can operate vessels as basically best-in-class with the top liner companies in the world.

[Operator]

[Operator Instructions] We will now take our next question from Magnus Fyhr from Seaport Global. Please go ahead.

[Magnus Fyhr, Seaport Global]

Just one question on the cash position, I mean you’ve got about $160 million of cash. You got some asset sales of about $140 million. And then on top of that, you’ve got marketable securities over $100 million, that’s $400 million of liquidity to fund just one acquisition you have upcoming here. And on top of that, the acquisitions that you made there’s another $100 million of cash flow. What’s the comfort level here on the balance sheet, how much cash you need to keep on the balance sheet on an ongoing basis just to be flexible?

[Ole Hjertaker, Chief Executive Officer]

Because most of our assets are on long term charters to high quality counterparties, there’s very significant visibility in the cash flows. Therefore, I would say with this portfolio, we are comfortable running the company with, I would say, $25 million to $50 million cash buffer. We have of course always on a week-by-week and one week, you may have an installment and then revenues might come in next week. So you need to have some buffer but you don’t need to have very huge buffer. So that 25 to 50 it should be more than sufficient to run this company on a cash flow basis. And so we do believe we still have good investment capacity in addition to the three vessels we announced earlier today.

[Magnus Fyhr, Seaport Global]

And you’ve been I mean very active here in the last three months. I mean do you still feel that there are equally as good opportunities still in the market?

[Ole Hjertaker, Chief Executive Officer]

Well, we are screening for the new deal opportunities continuously and our objective is to continue building the portfolio, but we will not give specific guiding on volume that we’re going to do in the next quarter or two. Simply as I mentioned it’s a little earlier than -- it’s all about trying to do the right deals. So instead of guiding on volume, we report deals if we do a deal we do think make sense for us. And hopefully we can build the portfolio going forward with good projects.

[Magnus Fyhr, Seaport Global]

And just one last question on the cash flow statement, purchase of vessels $511 million. Was that just for the two acquisitions that closed during the second quarter, or is there anything else in there?

[Harald Gurvin, Chief Financial Office]

That’s for those acquisitions.

[Operator]

It appears that there are no further questions at this time. I would like to turn the conference back to you for any additional or any closing remarks.

[Ole Hjertaker, Chief Executive Officer]

We’d like to thank everyone for participating in our second quarter conference call. And if you do have any follow-up questions, there’re contact details in the press release where you can get in touch with us through the contact pages on our webpage, wwww.shipfinance.bm. Thank you.

[Operator]

That concludes today’s conference call. You may now disconnect.